Take the case of valuer whose only defence to a lender’s negligence claim is that he made the offending report more than six years before the start of the proceedings. In so far as the claim is made for breach of contract, there is no answer to the limitation defence. Inevitably, the lender will rely upon the tortious (negligence) liability incurred by the valuer, as time starts to run, for the purpose of the ordinary limitation period, only when the alleged loss has been sustained.
And there the problem starts, the House of Lords having held in Nykredit Mortgage Bank plc v Edward Erdman Group Ltd (No 2) [1998] 1 EGLR 99 that the loss occurs on the first day that the outstanding debt is unsecured by a combination of the current value of the property and the value of the borrower’s covenant to repay. Thus, the clock may begin to tick, for example, on the day that the borrower’s estranged wife puts in her claim for maintenance.
However, as convincingly argued by John Murdoch in his review of DNB Mortgages Ltd v Bullock & Lees (a firm) [2000] 1 EGLR 92 (see
Perhaps the law should find out what really goes on out there. If you happen to deal in mortgages by the van load, please “add your own comments” by clicking on the button below.
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Take the case of valuer whose only defence to a lender’s negligence claim is that he made the offending report more than six years before the start of the proceedings. In so far as the claim is made for breach of contract, there is no answer to the limitation defence. Inevitably, the lender will rely upon the tortious (negligence) liability incurred by the valuer, as time starts to run, for the purpose of the ordinary limitation period, only when the alleged loss has been sustained.
And there the problem starts, the House of Lords having held in Nykredit Mortgage Bank plc v Edward Erdman Group Ltd (No 2) [1998] 1 EGLR 99 that the loss occurs on the first day that the outstanding debt is unsecured by a combination of the current value of the property and the value of the borrower’s covenant to repay. Thus, the clock may begin to tick, for example, on the day that the borrower’s estranged wife puts in her claim for maintenance.
However, as convincingly argued by John Murdoch in his review of DNB Mortgages Ltd v Bullock & Lees (a firm) [2000] 1 EGLR 92 (see Promises, promises Estates Gazette 25 March 2000, p148), the exercise is unacceptably artificial. After all, how can you value the covenant of a single borrower when the real world deals in portfolios of loans, and the risk of default is presumably estimated on what might be called an actuarial basis?
Perhaps the law should find out what really goes on out there. If you happen to deal in mortgages by the van load, please “add your own comments” by clicking on the button below.
